Scribd
Upload
99 views18 pages

Review Materials: Prepared By: Junior Philippine Institute of Accountants UC-Banilad Chapter F.Y. 2019-2020

The document summarizes key aspects of the conceptual framework for financial reporting. It discusses the objectives of the conceptual framework, which are to establish a foundation for accounting standards and provide a reference for solving emerging reporting problems. It also outlines the 7 statements of financial accounting concepts issued by FASB, covering issues for both business and non-business entities. The conceptual framework has three levels including objectives, elements, and recognition/measurement criteria. It describes the basic objectives of financial reporting and the primary qualitative characteristics of accounting information as relevance and reliability.

Uploaded by

AB Cloyd
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
99 views18 pages

Review Materials: Prepared By: Junior Philippine Institute of Accountants UC-Banilad Chapter F.Y. 2019-2020

The document summarizes key aspects of the conceptual framework for financial reporting. It discusses the objectives of the conceptual framework, which are to establish a foundation for accounting standards and provide a reference for solving emerging reporting problems. It also outlines the 7 statements of financial accounting concepts issued by FASB, covering issues for both business and non-business entities. The conceptual framework has three levels including objectives, elements, and recognition/measurement criteria. It describes the basic objectives of financial reporting and the primary qualitative characteristics of accounting information as relevance and reliability.

Uploaded by

AB Cloyd
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 18

Review Materials

Prepared by:
Junior Philippine Institute of
Accountants UC-Banilad Chapter
F.Y. 2019-2020
The Conceptual
Framework
Objectives of the Conceptual Framework

▪ The framework was to be the foundation


for building a set of coherent accounting
standards and rules.
▪ The framework is to be a reference of
basic accounting theory for solving
emerging practical problems of reporting.

3
Statements of Financial Accounting Concepts

▪ The FASB has issued seven


Statements of Financial Accounting
Concepts (SFACs) to date (Statements
1 through 7.)
▪ These statements set forth major
recognition and reporting issues.
▪ Statement 4 pertains to reporting by
non-business entities.
▪ The other six statements pertain to
4
reporting by business enterprises.
Statements of Financial Accounting Concepts

5
Overview of the Conceptual Framework

The Framework has three


different levels,comprised of:
▪ The first level consists of objectives.
▪ The second level explains financial
elements and characteristics of
information.
▪ The third level incorporates
recognition and measurement
6
criteria.
Conceptual Framework for Financial Reporting
Basic Objectives of Financial Reporting

To provide information:
• about economic resources, the claims on
those resources and changes in them.
• that is useful to those making investment
and credit decisions.
• that is useful to present and future
investors, creditors in assessing future cash
flows.
• to individuals who reasonably understand
business and economic activities.
8
Hierarchy of Accounting Qualities
Qualitative Characteristics of Accounting Information

• Primary qualities of accounting information


are relevance and reliability.
• Secondary qualities are comparability and
consistency of reported information.

10
“Relevance of
Primary information means
Characteristic information capable of
of Accounting making a difference in
Information: a decision context.”

Relevance Ingredients of relevant


information are:
• Timeliness
• Predictive value
• Feedback value
11
Information is reliable
Primary when it can be relied
Characteristic on to represent the
of Accounting true, underlying
Information: situation.

The ingredients of
Relevance reliable information
are:
• verifiability
• representational
12 faithfulness
• neutrality (unbiased)
Comparability: the
similar measurement
and reporting for
Secondary different enterprises.
Characteristics
of Accounting
Consistency: application
Information of the same
accounting treatment
to similar events by an
enterprise period to
period.
13
Basic Elements of Financial Statements

14
Recognition and Measurement Criteria

15
End of Topic
Please see complementary test bank for
practice problems and theories.

16
Dear, you.
Always be in pursuit for
the one you have not yet
become. Keep going!
Love,
Your UCB-JPIA family

17
Reference:
▪ Robertson, J., Clark, R. (2004). Chapter 2: The Conceptual
Framework. New Mexico State University. Las Cruces, New
Mexico
18

You might also like